Under the provisions of the Philippine Deposit Insurance Corporation (PDIC) Law, primarily Republic Act No. 3591 as amended by Republic Act Nos. 9576, 10846, and 11840, the practice of deposit splitting is explicitly addressed. This topic is of particular importance in banking law as it pertains to deposit insurance coverage limits and the efforts of the PDIC to ensure the integrity of deposit insurance systems. Here’s a detailed analysis:

1. Definition and Prohibition of Deposit Splitting

Deposit splitting, or simply splitting of deposits, refers to the act of subdividing a deposit account into multiple accounts for the purpose of increasing the total insured amount beyond the coverage limits set by the PDIC. This practice is typically undertaken by depositors, sometimes with the assistance of bank officers or personnel, to circumvent the maximum deposit insurance coverage limit.
The PDIC sets a maximum deposit insurance coverage (currently PHP 500,000 per depositor per bank). When a depositor splits a single deposit into multiple accounts, potentially under different names or structures, to obtain insurance coverage beyond this limit, it is considered an abuse of the deposit insurance system.

2. Statutory Basis and PDIC Regulations

Republic Act No. 3591, as amended, grants the PDIC the authority to regulate and investigate deposit splitting practices. The law was amended multiple times (notably by R.A. No. 9576, R.A. No. 10846, and R.A. No. 11840) to strengthen PDIC’s powers to prevent and address fraudulent practices in the banking system, including deposit splitting.
The PDIC issued specific regulations defining and prohibiting deposit splitting. Under PDIC guidelines, any arrangement or structure that seeks to evade or bypass the statutory deposit insurance limit by splitting deposits is prohibited.

3. Elements of Deposit Splitting

Same Beneficial Ownership: Deposit splitting often involves accounts that, while registered under different names or structures, are ultimately owned by the same person or entity. To prove splitting, the PDIC examines whether the beneficial ownership of the split deposits rests with a single individual or entity.
Intent to Increase Coverage Beyond Statutory Limit: A key element is the depositor's intent to increase deposit insurance coverage beyond the PHP 500,000 cap. The presence of this intent can be evidenced by the timing, frequency, and structuring of deposits, especially if done shortly before the bank is declared insolvent or closed.
Coordination with Bank Officers: Often, deposit splitting may occur with the assistance or tacit approval of bank personnel. This can involve advising the depositor on how to structure deposits or even facilitating account creation to maximize insurance coverage illegally.

4. Investigative Powers and Authority of PDIC

Under R.A. No. 10846, the PDIC is empowered to conduct thorough investigations into suspected deposit splitting. This authority includes examining bank records, reviewing depositor relationships, and interviewing bank personnel as necessary.
If the PDIC determines that deposit splitting has occurred, it has the authority to exclude those deposits from insurance coverage. In such cases, only the primary deposit will be covered up to the statutory limit of PHP 500,000, and any additional split deposits will not receive insurance protection.
The PDIC may also impose administrative sanctions on the bank officers and personnel involved in deposit splitting schemes.

5. Administrative and Criminal Penalties

Administrative Penalties: The PDIC is authorized to impose administrative penalties on banks and their officers found complicit in deposit splitting. This includes fines, suspension, or prohibition from engaging in further banking activities. The PDIC may also require banks to revise their deposit management practices to prevent future occurrences.
Criminal Penalties: R.A. No. 11840 introduced stricter penalties for fraud, including deposit splitting. Criminal liability can extend to both depositors and bank employees if intent to defraud the PDIC is established. Violators may face fines and imprisonment, reflecting the seriousness with which deposit splitting is viewed under Philippine law.

6. Role of PDIC in Preventing and Mitigating Deposit Splitting

Public Awareness Campaigns: The PDIC has implemented programs to educate depositors on the importance of understanding deposit insurance limits. Through awareness campaigns, the PDIC emphasizes that deposit splitting is illegal and that attempting to evade coverage limits jeopardizes a depositor’s ability to claim insurance.
Bank Compliance and Training Programs: The PDIC collaborates with banks to ensure compliance with anti-splitting regulations. This includes mandatory training for bank personnel on identifying and preventing deposit splitting and establishing internal compliance systems to flag suspicious deposit activities.

7. Judicial Interpretation and Case Law

Philippine courts have reinforced the PDIC’s stance on deposit splitting. In cases where deposit splitting has been alleged, courts examine the factual circumstances to determine beneficial ownership and intent. The Supreme Court has ruled that PDIC’s mandate to protect the Deposit Insurance Fund (DIF) justifies strict measures against deposit splitting, upholding PDIC’s actions to exclude split deposits from insurance coverage.
The courts also support the PDIC’s authority to impose penalties on depositors and bank officials engaged in deposit splitting, recognizing the importance of a stable and honest deposit insurance system for public confidence in the banking sector.

8. Limitations and Challenges in Enforcement

The PDIC faces certain challenges in fully enforcing anti-splitting regulations, particularly in cases where depositors use multiple intermediaries or corporate structures to obscure beneficial ownership. However, recent amendments to the law have enhanced PDIC’s access to financial records and information-sharing with other regulatory bodies.
Another limitation lies in the operational burden on the PDIC and banks to monitor compliance actively. Banks are required to maintain stringent due diligence practices, increasing their compliance costs but ensuring a more resilient banking system.

9. Recent Amendments under R.A. No. 11840

R.A. No. 11840 further strengthens PDIC’s authority to address deposit splitting by increasing the penalty framework and refining the regulatory standards against fraudulent schemes.
This law also expands the PDIC’s cooperation with other financial regulators, such as the Bangko Sentral ng Pilipinas (BSP), to monitor and act on deposit splitting activities more effectively, promoting a coordinated approach to combating fraudulent practices in the banking sector.

10. Conclusion

The prohibition on deposit splitting under the PDIC law serves to protect the integrity of the deposit insurance system, ensuring that insurance coverage remains fair and in line with statutory limits. The PDIC’s regulatory, investigative, and enforcement powers are continually evolving to address new challenges in deposit splitting, underscoring the importance of safeguarding public trust in the Philippine banking system.
For both depositors and banking institutions, compliance with anti-splitting laws is crucial. Violations not only lead to administrative and criminal liabilities but also erode the stability of the financial system.